Problem 24-3A Departmental income statements; forecasts LO P3

Williams Company began operations in January 2017 with two operating (selling) departments and one service (office) department. Its departmental income statements follow.

WILLIAMS COMPANY Departmental Income Statements For Year Ended December 31, 2017
	Clock			Mirror			Combined
Sales	$	250,000		$	105,000		$	355,000
Cost of goods sold		122,500			65,100			187,600
Gross profit		127,500			39,900			167,400
Direct expenses
Sales salaries		21,000			6,900			27,900
Advertising		1,900			700			2,600
Store supplies used		950			600			1,550
DepreciationEquipment		1,900			700			2,600
Total direct expenses		25,750			8,900			34,650
Allocated expenses
Rent expense		7,070			3,660			10,730
Utilities expense		2,700			2,000			4,700
Share of office department expenses		12,000			7,500			19,500
Total allocated expenses		21,770			13,160			34,930
Total expenses		47,520			22,060			69,580
Net income	$	79,980		$	17,840		$	97,820

Williams plans to open a third department in January 2018 that will sell paintings. Management predicts that the new department will generate $56,000 in sales with a 65% gross profit margin and will require the following direct expenses: sales salaries, $8,500; advertising, $1,100; store supplies, $1,000; and equipment depreciation, $900. It will fit the new department into the current rented space by taking some square footage from the other two departments. When opened, the new painting department will fill one-fifth of the space presently used by the clock department and one-fourth used by the mirror department. Management does not predict any increase in utilities costs, which are allocated to the departments in proportion to occupied space (or rent expense). The company allocates office department expenses to the operating departments in proportion to their sales. It expects the painting department to increase total office department expenses by $7,500. Since the painting department will bring new customers into the store, management expects sales in both the clock and mirror departments to increase by 11%. No changes for those departments gross profit percents or their direct expenses are expected except for store supplies used, which will increase in proportion to sales. Required: Prepare departmental income statements that show the companys predicted results of operations for calendar-year 2018 for the three operating (selling) departments and their combined totals. (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.